EUR/USD bulls eye 1.0730 despite firmer yields, hawkish Fed bets, focus on EU GDP, ECB concerns

• EUR/USD picks up bids to refresh intraday high, defends previous rebound from weekly low.
• US Dollar fails to cheer hawkish Fed bets, upbeat yields amid mixed economic concerns.
• Sluggish sentiment prods Euro buyers as fears of recession, higher rates return to the table.
• Final readings of Eurozone Q1 GDP, US employment clues eyed for clear directions.

EUR/USD renews intraday high around 1.0710 as bulls keep the reins for the second consecutive day amid early Thursday. In doing so, the major currency pair fails to justify looming economic fears and upbeat US Treasury bond yields ahead of the revised readings of Eurozone first quarter (Q1) 2023 Gross Domestic Product (GDP).

Growing fears from the economic slowdown, as perceived from the latest downbeat statistics from the top-tier economies, weigh on the market sentiment and the EUR/USD price of late. Adding strength to the economic pessimism are the concerns surrounding higher interest rates from the headline central banks, especially after the latest hawkish surprises from the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC).

On Wednesday, Germany’s Industrial Production (IP) improved to 0.3% MoM versus 0.6% market forecasts and -2.1% prior (revised) whereas the yearly growth figures ease to 1.6% from 2.3% (revised) previous readouts and 1.2% expected.

That said, European Central Bank (ECB) Governing Council member Isabelle Schnabel pushes back the recent dovish concerns by stating that the impact of our tighter monetary policy on inflation is expected to peak in 2024. However, ECB policymaker, Klaas Knot, said that prolonged monetary tightening might still lead to stress in financial markets, which in turn prod ECB hawks. The ECB Official also added, “Inflation expectations in markets seem optimistic.”

On a different page, the looming fears of a $1.0 bond issuance by the United States Treasury Department, due to the debt-ceiling deal, also prod the market sentiment and weigh on the bond price, as well as bolster the yields while putting a floor under the DXY.

It’s worth noting that the latest Organisation for Economic Co-operation and Development (OECD) report said that the global economy is set for a weak recovery over the coming years as persistent core inflation and tighter monetary policy weigh on demand. Also acting as the negative for the EUR/USD is the latest increase in the market’s bets on the Federal Reserve’s 25 bps rate hike in July increased, even as the June Federal Open Market Committee (FOMC) is likely to keep the rates unchanged.

With this, the benchmark US 10-year Treasury bond yields rose the most in five weeks to 3.79% while the two-year counterpart marched to 4.52% at the latest. That said, the US 10-year bond coupons remain mostly unchanged at 3.79% by the press time whereas the two-year yields grind higher to 4.54% as we write. While portraying the market’s mood, Wall Street closed mixed and S&500 Futures struggle for clear directions.

Hence, uncertain markets allow the EUR/USD pair to benefit from the US Dollar’s retreat, down 0.10% intraday near 104.00 at the latest. However, the quote’s further upside hinges on the Eurozone Q1 GDP, US Initial Jobless Claims and the central bank chatters.

Technical analysis

EUR/USD rises within a one-week-old Pennant formation, currently between 1.0730 and 1.0670. That said, the Euro pair’s rebound from a five-month-old ascending support line joins the recently downbeat RSI (14) line, as well as an impending bull cross on the MACD, to keep buyers hopeful.

Also read: EUR/USD Price Analysis: Euro bulls flex muscles within weekly Pennant around 1.0700